With the unemployment rate holding steady at 3.7%, it is clear the US job market remains strong. Yet there are still Americans currently out of work who are either looking to or already collecting unemployment benefits. From a taxation standpoint, what does that mean? Are unemployment benefits still subject to federal income taxes? And how does that impact your potential tax refund?Yahoo Finance’s Rebecca Chen breaks down the details.For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.Editor’s note: This article was written by Angel SmithVideo TranscriptRACHELLE AKUFFO: The latest jobs report shows unemployment at 3.7%, but what does this mean for taxes? To break it down for us, Yahoo Finance reporter Rebecca Chen is joining us now. So Rebecca, give us the lay of the land here.REBECCA CHEN: Hi. So this is a very– one of the most common questions that accountants get is how unemployment benefits tax? And this is really relevant because about 2 million Americans actually get a benefit and the average weekly payment is nearly $400 a week. So that can really add up to a big chunk of amount.And how this works– the short answer is, unfortunately, it is taxed at the federal level. And how it works is, normally, you get something called a 1099-G in your mail and you will go to box 1. As you can see here, it’s called the Unemployment Compensation.Whatever amount is in that box 1, you feed it into your tax return and that is how that will be taxed. And the way that the rate will work for your personal return is you have to add it to other earned income and that will decide your personal bracket. So for example, let’s say if we do– if you work for 10 months and then you receive an unemployment check, so you combine those together to decide what rate you’re charged federally.
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